As the dust settles from the 2016 World Economic Forum (WEF) in Davos, which concluded on 23 January, political and business leaders now have the opportunity to reflect on some of the key matters discussed at the three-day event. One of the most dominant topics of interest was the so-called ‘Fourth Industrial Revolution,’ led by disruptive new technologies such as fintech.
Rather than fighting the fintech revolution, large banks have seemingly embraced the high-growth industry by recognising the mutual benefits that could arise through enhanced cooperation and engagement. The extent to which large banks are both willing and able to engage with fintech remains to be seen. Nonetheless, the recognition that the industry received from the world’s leading figures is an important step forward.
One criticism of the 2016 World Economic Forum, however, was the omission of small and medium enterprises (SMEs) from official discussions. By focusing on macro-economic trends, the WEF tends to overlook the fundamental role SMEs play in driving global growth and innovation. If a country wants to increase economic productivity or employment outcomes, SMEs are typically the first port of call.
The UK is a prime example of this; assuming a colossal 99% of the UK’s private sector and with a combined turnover of £1.8 trillion, Britain’s SME population has evolved into a diverse collection of sectors and skillsets, accounting for 60% of private sector employment.
At the risk of overregulation, there needs to be greater awareness of the link between alternative finance and SME growth, as is the case here in Britain. If this link can be nurtured then investors, high-growth businesses and the national economy all stand to benefit.
Tax-efficient investments through initiatives like the Enterprise Investment Scheme (EIS) have been a fundamental means of supporting this link here in the UK. The WEF in Davos offered an ideal opportunity for leaders to explore similar ways of fuelling SME growth around the world. This opportunity, unfortunately, was missing from the agenda.
In Britain, EIS will continue to be a leading tax-efficient investment scheme in the year ahead. With new reforms to Britain’s pension scheme, the number of investors and entrepreneurs that will be using EIS in 2016 is projected to increase. This is something the Government should look towards raising awareness on. The facilitation of private capital into small businesses through EIS has been a great success to date, and is something Britain should be showcasing to other countries that are looking for new ways to support their SMEs.